Sep

U.S. Core PCE Price Index, Canada GDP, Revised UoM Consumer Sentiment

27/09/2024 - 07:30 UTC

The US currency traded moderately lower against most of its major peers on Thursday, with the US dollar index down 0.34% and headed to recent multi-month lows. The move came as US gross domestic product reported an unrevised 3% growth. A gauge of new orders for key U.S.-manufactured capital goods unexpectedly rose in August, although business spending on equipment appears to have waned in the third quarter. Investor sentiment is divided as a strong economy raises questions about the need for further Fed tightening.

Several U.S. Federal Reserve officials spoke on Thursday, including Fed chairman Jerome Powell, but most avoided discussing monetary policy. Treasury Secretary Janet Yellen expressed optimism about a soft economic landing, but warned that reducing housing costs is crucial for taming inflation.

The market is currently expecting a 50-basis point rate cut by the Federal Reserve in November, with a 46.7% probability according to the CME's FedWatch tool. However, a smaller 25-basis point cut is considered as more likely, with odds standing at 53.3%.

Major U.S. indexes had a positive session on Thursday, with the US 500 up by 0.28% to hit new all-time highs, the US 30 up by 0.63% and the US tech 100 surging to new record levels, up by 0.33% by the end of the session. Market participants will most likely be watching economic indicators and more specifically the PCE price index, set for release later today, as that could significantly influence the dollar's trajectory this week.

On the energy front, the two main crude oil benchmarks WTI and Brent declined by more than 3% on Thursday, for a second day in a row, and were on track to end the week lower as investors focused on expectations of increased output from Libya.

In other news, China's central bank cut interest rates and increased liquidity on Friday to boost economic growth and combat deflation, aligning with the government's goal of 5% growth for the year.

For Friday, some price action could be seen upon the release of the U.S. Core PCE price index, GDP numbers from Canada, US personal income and personal spending and the University of Michigan consumer sentiment and inflation expectations.

EUR/USD

The EUR/USD pair moved back toward the upper range on Thursday, benefiting from a broad-market selloff in the US dollar. Better-than-expected US economic data helped alleviate some concerns of a looming slowdown in the US economy.

In August, US Durable Goods Orders came in flat at 0.0% month-on-month, down from the previous month’s robust growth, but still outperformed the anticipated 2.6% contraction. Meanwhile, Initial Jobless Claims for the week ending September 20 fell to 218K, beating expectations of 225K and marking an improvement from the prior week’s revised 222K figure.

Friday brings a critical test with the release of Personal Consumption Expenditure (PCE) inflation data. Any significant deviation from expectations could disrupt the current market narrative.

Gold

Gold soared to a new all-time high of $2,685 on Thursday and ended the session just above the $2,670 mark. US economic data points to a "soft landing" scenario, while China’s stimulus measures and escalating tensions in the Middle East further fueled the rally in gold prices.

China's continued efforts to stabilize its real estate sector provided additional support for gold. This, combined with last week's 50 bps rate cut by the Federal Reserve, has propelled gold to successive record highs.

WTI Oil

Oil prices fell sharply on Thursday after reports that Saudi Arabia is set to abandon its unofficial $100 price target for crude and move forward with OPEC+ plans to boost output in December.

According to reports from the Financial Times, Saudi Arabia, the world’s leading oil exporter, is preparing to raise output in line with OPEC+ plans, despite earlier efforts to support prices through production cuts.

Additionally, data released on Wednesday revealed a larger-than-expected draw in US crude inventories, with a reduction of 4.47 million barrels.

US 500

U.S main indexes ended the session with gains as strong performance in chip stocks, led by Micron, and positive economic data fueled investor sentiment.

Micron Technology surged nearly 15%, leading gains in the semiconductor sector and lifting the broader market. The memory chip maker exceeded Wall Street expectations with its fiscal fourth-quarter results and provided strong guidance for the current quarter, driven by robust demand for AI-related high-bandwidth memory chips.

Investors cheered stronger-than-expected economic data on Thursday, adding to optimism for a “soft landing” scenario. US durable goods orders unexpectedly rose in August, while jobless claims fell more than anticipated, pointing to continued resilience in the labor market.

U.S. Core PCE Price Index, Canada GDP, Revised UoM Consumer Sentiment

EUR/USD

Gold

WTI Oil

US 500

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